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Unformatted text preview: AEM 4150 PRICE ANALYSIS Fall 2008 Problem Set #6 Suggested Solutions 1. (a) Farm-processor marketing margin = processor price farm price = $1.45 1 = $.45. Processor-retail marketing margin = retail price processor price = $3.20 1.45 = 1.75 Farm-retail marketing margin = retail price farm price = $3.20 1 = $2.20 (b) Wegmans profit = processor-retail marketing margin cost = $1.75 .6 = $1.15. Yes. Marketing margin is the price of marketing services. Profit is the return to entrepreneurship and therefore is a component of marketing margin. (c) k = 0.8. MM = Pf (1/k)*pf = $3.20 (1/0.8)*1 = $1.95 2. (a) Graph Dr and Sf in the following diagram. P f *=23.3 D f : Pf=60-Q *=6.7 P r * =63.3 S f : Pf = -50+2Q S r : Pr=-10+2Q D r : Pr=100-Q Q P (b) Derived Demand facing growers (Df )= primary demand MM = 100 Q 40 = 60 Q P f = 60 Q 1 Derived Retail Supply Function (S r ) = primary supply + MM = 50 + 2Q + 40 = 10 + 2Q P r = -10 + 2Q...
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This homework help was uploaded on 02/20/2009 for the course AEM 4150 taught by Professor Kaiser,h.m. during the Fall '07 term at Cornell University (Engineering School).
- Fall '07